RBI could have done more to boost property market, say developers

Though the Reserve Bank of India’s (RBI’s) move to cut repo rates by 25 basis points brought cheer to property developers, the central bank could have done more to help the sector, they said.

Besides a slowdown, developers are battling issues surrounding the goods and services tax (GST) which has hit the sales of premium apartments and the Real Estate (Regulation and Development) Act or Rera, which is strict on compliance. Sales and new launches have declined as developers have been focusing on meeting Rera compliance.

“While it remains for the Monetary Policy Committee (MPC) to decide, India's business and industry view the present scenario as ideal for the RBI to have cut rates by a bit more, given that inflation will most likely remain at moderate level," said Niranjan Hiranandani, chairman and managing director at Hiranandani Communities.

While a cut of 50 basis points (bps) would have been welcome, a cut of 25 bps after four straight reviews when rates remained constant, is a welcome step, Hiranandani said.

In the policy, RBI Governor Urjit Patel said the MPC thought there was an urgent need to reinvigorate private investment, remove infrastructure bottlenecks and provide a major thrust to the Pradhan Mantri Awas Yojana for the housing needs of all. “This hinges on speedier clearance of projects by the states," he said.

Rajesh Krishnan, founder and chief executive officer (CEO) at Brick Eagle, an investor in affordable homes, said a 25-basis point cut may not move the needle for the affordable housing sector. "Despite infrastructure status, banks are not lending for affordable housing projects and hence the sector continues to be capital-starved. We believe this will change only if affordable housing projects are included under priority sector lending," Krishnan said.

Brotin Banerjee, managing director and CEO at Tata Housing Development Company, said the rate cut coupled with commensurate benefits for borrowers would impact home loan rates positively and enhance consumer sentiment.

“With the market view calling for measures that encourage investment to boost growth numbers, and with the installation of a regulatory regime for the real estate sector, we expect this move to keep the stimulus on for potential homebuyers to invest, and to benefit current borrowers," Banerjee said.

Vinod Rohira, managing director-commercial real estate and REIT at K Raheja Corp, said, “With the recent change in reforms and policies, this rate cut comes as a blessing improving buyer sentiments.… We are optimistic that the banks will also pass on the benefit to the consumers, which in turn will help propel the growth of the industry."